China's Beneficial Owner System

KC Global mentioned in its popular article on Xiaohongshu, "How Do the Wealthy Hide Assets in China?" that due to the absence of a beneficial owner registration system in China, true beneficiaries can conceal their identities through complex holding structures or so-called "nominee holdings," effectively hiding assets in China.

However, this situation is about to change. On November 1, 2024, China will join other countries in implementing a beneficial owner system. On April 30, 2024, the People's Bank of China announced:

"To enhance market transparency, maintain market order and financial order, and prevent and combat money laundering and terrorist financing activities, in accordance with relevant laws and administrative regulations on anti-money laundering and corporate registration management, and with the approval of the State Council, the People's Bank of China and the State Administration for Market Regulation jointly issued the 'Management Measures for Beneficial Owner Information' (Order No. 3 [2024] of the People's Bank of China and the State Administration for Market Regulation, hereinafter referred to as the 'Management Measures'), which will take effect on November 1, 2024."

The Management Measures establish and improve China's beneficial owner information filing system, representing an important step in optimizing the business environment. Advancing the beneficial owner information filing system will provide clearer insights into the equity structure and ultimate control and benefits of entities like companies, enhancing market transparency, improving information symmetry and mutual trust among business entities, increasing transaction security and efficiency, and further optimizing China's business environment. Additionally, the beneficial owner information filing system will help prevent shell companies, false capital injection, nested shareholding, and other violations from the source, assist in combating telecom and online fraud, and help prevent and curb corruption.

The Management Measures adhere to the principles of rule of law, simplification, and convenience, fully considering China's national conditions. They stipulate which entities must file beneficial owner information, establish commitment exemptions, clarify beneficial owner identification standards, and limit the conditions for querying and using filing information, thereby better regulating the filing of beneficial owner-related information by companies and other entities.

Moving forward, the People's Bank of China and the State Administration for Market Regulation will continue to implement the Management Measures, timely publish the "Guidelines for Beneficial Owner Information Filing," and provide targeted guidance for the specific reporting work of relevant entities, steadily advancing the filing process.

In this article, we will interpret the background of the implementation of the Management Measures and the key points of the entire document.